Independent review and analysis

Scullion v Bank of Scotland Plc – our view

On a superficial reading the recent Scullion v Bank of Scotland Plc (t/a Colleys) [2011] EWCA Civ 693 decision may appear to have little relevance to lender/valuer professional negligence claims as the case related to a consumer litigating against a valuer. However, it is our view that the decision could impact on lender/valuer disputes and lending policies.

One original limb of the claim was that the ‘capital and rental valuations were negligent’. Anyone involved in the current round of professional negligence claims will recognise such a phrase! In this case, the Court held that there was an overvaluation of both the capital and rental valuations and that the valuer owed a duty of care to the borrower. This view was unanimously overturned by the Court of Appeal who concluded that a valuer did not owe a duty of care to a buy-to-let investor.

Additionally the Court of Appeal decision confirmed that a valuer providing a rental value did not confirm that the transaction would be self funding stating, “rental return can be a tricky and sensitive issue”.

The question that now follows is whether lenders should seek specialist advice regarding the rental figure, in respect of buy to let lending. This is not a new question.  Most lenders have historically relied on the valuer not only providing the capital valuation, but also providing a rental figure confirmation.  However, we are aware of lenders who required, in addition to the capital valuation, a separate rental confirmation from a member of the Association of Residential Letting Agents.  While such a position was not popular with intermediaries in the pre credit crunch days, we think lenders are more likely to be dogmatic with such policies now.

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